Labor Department's New Regs Aim To Rescue Gig Workers From Their Own Preferences
Biden undid Trump-era rules for independent contractors, but the new rule will likely last only until another Republican is elected president. This is no way to regulate an economy.
Most workers in the gig economy say they like their jobs and value the flexibility that comes with being an independent contractor.
The federal government, however, is coming to rescue them from their own choices.
The Department of Labor announced new rules this week that will limit the circumstances in which workers can be classified as independent contractors. Once implemented, those rules will force some workers currently operating as independent contractors to become full-fledged employees—thus triggering other federal mandates regarding pay and benefits.
"This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they've earned," acting Secretary of Labor Julie Su said in a statement.
In reality, the department is unleashing federal bureaucrats to micromanage the decisions that those workers have already made for themselves. When it is fully implemented in March, the new rule will impose a vague six-part test to determine whether a worker should count as an employee or a contractor. Determining factors whether the job is deemed to be permanent or temporary, as well as how much control bosses have over employees' time, and how essential the employees are to the business' overall activity.
Those determined to be employees will be forcibly reclassified even if they do not want to be.
And many seemingly don't. A 2021 Pew survey of gig economy workers found that 78 percent were satisfied with their jobs and that most valued the flexibility to set their own schedules or earn small amounts of extra cash on the side. Another 2021 study conducted by Jabra found that only about 10 percent of independent contractors desired a more traditional job while nearly 80 percent intended to keep freelancing, National Affairs reported.
This is a problem that requires federal action?
"In reality, what workers want most in today's economy is flexibility," Jarrett Dieterle, a senior fellow at the R Street Institute and author of that National Affairs essay, tells Reason.
Rather than pushing contractors towards being full-time employees, Dieterle says the government should seek ways for those workers to carry benefits from one job to another—allowing health care coverage or retirement savings accounts that belong to individual workers rather than being tied to specific employers. "Doing so would maintain worker flexibility while also providing more benefit options, all while avoiding the harmful effects of reclassifying broad swaths of the American workforce," he says.
An unintended consequence of the change could be the loss of some jobs, warns the Associated Builders and Contractors (ABC), a trade association of non-union construction firms.
"Regrettably, the confusion and uncertainty resulting from the final rule will cause workers who have long been properly classified as independent contractors in the construction industry to lose opportunities for work," said ABC CEO Ben Brubeck in a statement. "This move will jeopardize the ability of construction firms to continue the industry's longstanding practice of utilizing legitimate independent contractors."
While the new rule will "reverberate" across a variety of industries where independent contractor work is common—including health care, construction, and food service—The Wall Street Journal notes that the real target of the Biden administration's new policy seems to be gig economy platforms like Uber and DoorDash.
In a statement to the Journal, Uber said the new rules would not "materially change" existing labor rules for the more than 1 million Americans who work as independent contractors while driving for Uber. It's widely expected that ride-sharing services and other app-based businesses will sue over the Department of Labor's new policy, potentially delaying or blocking its implementation.
Even if the new rules are eventually struck down in court, this week's announcement should underline one of the problems created by America's sprawling administrative state. The Biden administration's new independent contractor rule replaces a different—and more flexible—policy set by the Trump administration. Biden blocked the implementation of that policy shortly after taking office in 2021, and it's likely that the next Republican president—perhaps as soon as next year—will seek to undo the new rules announced by the Biden administration this week.
This is no way to regulate an economy. It means workers have a harder time planning for the future, businesses are forced to navigate ever-changing rules, and investors will be put off by government-created uncertainty.
The real solution is for Congress to settle this matter once and for all, but no one expects that to happen anytime soon. Instead, we're left with unelected bureaucrats telling American workers that they're being exploited by their own preferences for more flexible work arrangements.
